San Francisco cloud-computing powerhouse Salesforce girded itself against assaults by large software companies Monday by officially announcing an agreement to buy enterprise social-media company Buddy Media for nearly $700 million.

Salesforce agreed to pay $467 million in cash for the New York company, along with providing $184 million in Salesforce stock and $38 million in vested options and restricted stock units, for a total current value of $689 million. Buddy Media's board has already agreed to the deal, which is expected to close in the fall quarter.

Salesforce is in a hurry to build on its offerings as it faces increased competition from Redwood City-based Oracle (ORCL) and other software giants. Oracle has been aggressive in acquisitions in the cloud-computing space in the past few months, including spending $3.4 billion combined to buy RightNow Technologies and Dublin-based Taleo and last month's $300 million purchase of Buddy Media rival Vitrue.

Advertisement

Buddy Media focuses on marketing through social networks, giving companies tools to manage accounts across multiple social networks while hosting all the software on remote servers, the basis for cloud computing. Also known as software as a service, or SaaS, cloud computing is quickly becoming the standard for enterprise offerings, and Salesforce has been ahead of the competition in the space. It claims more than 100,000 customers.

"This acquisition is the largest deal ever done by Salesforce.com. It is also the largest acquisition of a New York City tech company in the last five years. Quite simply, the offer was a great one and one that our board, shareholders and management thought made sense to take," Buddy Media cofounder and CEO Michael Lazerow wrote in a blog post Monday.

However, Oracle -- which appears ready to announce the launch of its Public Cloud service this week -- is not the only company pushing into the cloud in an attempt to rival Salesforce. German titan SAP has agreed to spend a combined $7.7 billion on two Silicon Valley SaaS companies, San Mateo's SuccessFactors and Sunnyvale's Ariba. Intuit (INTU) and IBM are among the other companies making smaller deals in the cloud space to offer enterprise customers the popular option.

Salesforce, founded by Chairman and CEO Marc Benioff in 1999 after he spent 13 years at Oracle, has a long head start on the competition, however, and believes that investment in marketing offerings will keep it in the lead.

"Social media has caused the biggest transformation in marketing since the 'Mad Men' era, causing (chief marketing officers) to completely rethink their strategies," Marcel LeBrun, senior vice president of Salesforce's social-media engagement service Radian6, said in the company's news release. "By bringing together market leaders Radian6 and Buddy Media, we are doubling down on the Salesforce Marketing Cloud to provide CMOs with the ability to manage the entire social marketing life cycle."

Global Equities Research analyst Trip Chowdry doesn't believe that will be enough for Salesforce to stave off Oracle, however, saying in a note Monday morning that the Buddy Media acquisition is not "something for investors to cheer about."

"With launch of Oracle Public Cloud on June 6th, Oracle is inducing a major technological challenge to Salesforce. Salesforce architecture may head to obsolescence sooner than some may think," Chowdry wrote.

Buddy Media -- founded in 2007 with funding from Peter Thiel and Zynga CEO and co-founder Mark Pincus -- does bring big clients to Salesforce's stable, however, claiming eight of the top 10 U.S. advertisers, including Ford Motor, Hewlett-Packard (HPQ) and Mattel. Salesforce, which had a net loss in its most recent fiscal year after several years of profitability, said in the news release that the deal is likely to boost revenues but be a drag on earnings per share in the current fiscal year.

Salesforce stock gained 23 cents, or 0.2 percent, Monday to close at $131.22.

Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.